European Business News (EBN), 96-10-10

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated 0830 October 10

CONTENTS

[01] Viag and BT plan to invest $3.8 billion in Germany's telecoms market

[02] Southern Co. to buy 80% stake in Consolidated Electric Power Asia

[03] Fiat to raise funds with New Holland flotation

[04] Time Warner doubles the amount of cost cuts it plans after Turnermerger

[05] Economic issues dominate vice-presidential debate in U.S.

[06] UK's Clarke plays down tax cut hopes

[01] Viag and BT plan to invest $3.8 billion in Germany's telecoms market

In remarks prepared for a news conference later today, Viag chairman Georg Obermeier said 4.2 billion marks would be targeted at mobile phone activities.

The two companies expect their cooperation venture to break even startin in 2001, Obermeier said. Viag will take a majority stake in the mobile phone alliance with BT; 10 percent of the venture will be left available for a new partner, he said. BT's European director Patrick Gallagher was also due to address the news conference.

Viag and BT will seek the fourth German E2 mobile telephone licence, which the german government will award next February.

The group will create 9,000 new jobs by 2001, Obermeier said. Viag and BT aim for a share of 20 percent of the German mobile phone market and 7% of the fixed-line market, he said. However, he didn't provide any target dates. RWE on Wednesday pulled out of a telecoms alliance with BT and Viag, saying it would join in a rival alliace with German utility Veba and British telecom Cable and Wireless.

RWE will contribute about 3.6 billion marks to the new alliance. Vebacom, a joint venture between Veba and Cable & Wireless will contribute 4.8 billion marks.

A holding company called RWECOM will be created in which RWE will hold 75% and Vebacom 25%. The alliance will compete with Deutsche Telekom , and the DBKom alliance of Mannesmann, Deutsche Bahn and AT&T.

[02] Southern Co. to buy 80% stake in Consolidated Electric Power Asia

The unexpected move by Wu to sell a controlling stake in the power company he founded ends almost a year of speculation about how he would raise money to reduce the heavy debt load of his Hopewell Holdings business.That construction company owns about 60% of CEPA and will retain a 20% interest after the Southern deal is completed.

Wu is managing director of Hopewell and its largest shareholder. A spokesman for Southern, which is based in Atlanta, Georgia, said the company had agreed to pay HK$18.50 a share for the 80% stake. That is a 15% premium to CEPA's closing price Monday, when the company's shares were last traded.

Southern's Chief Executive Officer A. W. Dahlberg said the combination of CEPA's Asian power projects and Southern's operations 'will create one of the world's largest independent power producers.'

The agreement requires approval by CEPA shareholders and by the Hong Kong Stock Exchange.

[03] Fiat to raise funds with New Holland flotation

About 46.5 million common shares, with an option for an additional seven million shares, will be listed on the New York Stock Exchange later this month, Fiat said.

Fiat said the shares will be priced at between $20 and $2 apiece. More than 70% of the shares are expected to be placed with North American investors, mostly institutions.

The global lead managers for the issue are Goldman Sachs International and Mediobanca. Fiat specified that none of the offering's proceeds will remain with New Holland.

Separately, Fiat said it will put between 13,500 to 28,000 workers on temporary layoffs in November to cut car production by 26,500 units. The production cut, in response to the current slump in the domestic market, will affect output of the company's latest models,such as the Bravo and Brava.

[04] Time Warner doubles the amount of cost cuts it plans after Turnermerger

Time Warner chairman Gerard Levin made the surprise announcement at a meeting with analysts.

Some Time Warner holders expressed surprise at the figure, particularly as Levin didn't specify where the cost savings would come from. The company has insisted that no dramatic layoffs are planned at its own units, though Turner Broadcasting has already said it expects to lay off up to 1,000 people. One Time Warner shareholder expressed concern that Levin is creating unrealistic expectations.

The new emphasis on cutting costs represents a major shift in Time Warner's corporate culture and the growing influence of Ted Turner, who will become the merged company's vice chairman and largest stockholder.

Turner told analysts he wants to cut Time Warner's $17.5 billion debt load in half. His comments increase pressure on Levin to focus on spinning off Time Warner's massive cable operations. Many analysts say that's the only way Time Warner can move such a large portion of its debt off its balance sheet.

Levin has been resisting a spinoff, but has indicated recently that he is now open to the idea.

People close to Time Warner said the company has quietly retained consultant McKinsey & Co. to scrutinize every division of the entertainment giant for the cost cuts. Time Warner declined comment, as did McKinsey.

[05] Economic issues dominate vice-presidential debate in U.S.

Democratic incumbent Al Gore insisted that government's role is to plug those economic gaps the free market ignores. Republican challenger Jack Kemp countered that the government that does the least governs best.

The 90-minute debate also briefly touched on foreign policy, abortion and the dilemma of the inner cities. However, with the exception of the issue of abortion, these topics simply provided new territory for Gore and Kemp to conduct their economic arguments.

As expected, Gore repeatedly hammered home the Clinton administration's point that the 15% across-the-board tax cut proposed by Republican presidential contender Bob Dole would simply 'blow a hole in the deficit' and trigger a sharp rise in interest rates that would slow the economy.

In contrast, Gore said the administration's position is that the first priority must be to balance the budget while preserving spending on what it sees as priorities such as education and the environment.

Backing up this strategy is the fact the economy is now enjoying its lowest combined levels of inflation, interest rates and unemployment in 30 years which Gore attributed to President Clinton's economic policies.

Kemp countered by accusing the Clinton administration of conducting a 'regulatory reign of terror' against American businesses and complained the country's economic potential was being held in check by being 'over taxed.'

Without these impediments, U.S. could 'double the growth rate' from the current level of about 2.5% annually, Kemp claimed.

Citing supply-side economic ideas, Kemp claimed a tax cut now would stimulate the economy and ultimately supply more revenues to the federal government.

To help free up additional capital, Kemp promised he would abolish the entire U.S. tax code and replace all the existing taxes with a simplified system that would tax all forms of income only once. Interestingly enough, at another point in the debate, Kemp also proposed abolishing the capital gains tax in inner cities as a way of revitalizing them even though a capital gains tax would presumably be thrown out with the tax code proposal.

[06] UK's Clarke plays down tax cut hopes

In a BBC radio interview, Clarke said he would cut taxes only when it is 'sensible' do so. 'If you have a Conservative government for any length of time you have much lower levels of taxation than if you have a Labour government for any length of time. 'My aim is to cut taxes but my aim is to cut taxes only when it's sensible to do so. No intelligent member of the public give the government credit except when it can see that tax cuts are justified, in the interests of the economy and are got by firm control of public spending,' Clarke said.

In the same interview from the Tory party conference in Bournemouth, Clarke said he was totally opposed to the idea of a united states of Europe but wanted the UK to play a role in the partnership of nations in Europe.

'I am totally against the whole idea of a united states of Europe,' the Chancellor of the Exchequer said . 'We aren't federalists inside the Conservative party. The partnership of nations and our position inside that partnership was clearly spelled out yesterday,' Clarke added, referring to remarks by Prime Minister John Major and Foreign Secretary Malcolm Rifkind.

Clarke is due to deliver his keynote speech to the Conservative party conference in Bournemouth later in the day. He is expected to play up the prospects for the economy and say that the government can win the next election, due May 1997 at the latest.

The chancellor's speech is also expected to be scrutinized for any signs that he is departing from the government's policy of delaying any decision on joining a single European currency.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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